How to Structure Deal? // 8 house package from reluctant sellers

6 Replies

Hey ya'll,

I have been in contact with some landowners who have approx 35 properties which they self manage. The properties are less than 30 years old, they build them and have maintained them well over the years.  The owners are in their early to mid-60s and have professed a willingness to sell if the price is right.  They will not do owner financing.

We have specifically discussed 8 single family homes which are clustered together and have an average rent of $565 but market rents are closer to $650 so there is some upside to raising rents.  The houses have a retail market value of approx 55-65k.

I have offered them up to 45k which is my best offer with a bank financing scenario and they are uninterested. They want retail price for their houses and have a plan to sell 2-4 annually on the MLS.

As they won't owner finance and I can't offer any more, do you know of any more advanced techniques that would allow me to pay a higher price for the properties but still have reasonable cashflow?

Are there some creative ways of structuring this deal that I'm missing?

Try all cash at their price for some, if they give you an option to buy the rest, one at a time (at their price), at anytime over next 20 years. There you go. All cash and no seller financing.

@Josh Stack have you inquired as to the 'why' of why they dont think they want to do seller financing? 

I have been talking to a few individuals in similar circumstances, and that was their general feel too..... until I stated 'educating' them about the potential benefits of it :-) , partially trough sharing posts and blogs from here at BP!

The ones I have been talking too did not fully, or in some case at all, know about the benefits of no taxes on 1031s (and we are working on helping them reinvest with US as partners to fulfill the 1031), or how the spreading out of taxes can work with seller financing with only enough down to cover their 'recapture tax' which is due in the year of sale no matter how much is used for a down payment. 

I guess what I am saying is don't count them out until you, and they, are SURE that it is not for them. 

Dan Dietz

Sounds like you have the classic example of finding a “deal” but finding out it’s not motivated seller. Selling for retail on the mls is usually the best route if you’re a seller and can do that

@Daniel Dietz

They seem pretty savvy and I've put the seller financing to them in several different ways and tried to frame it around tax savings, more money in the long run etc etc.  They still aren't biting.  From our discussions, they have talked to their CPA and are happy with their planned divestment schedule.  I think they just want the walking money - it seems maybe they have been burned by a seller financed deal in the past and have decided not to do it again.  Thanks for the input though, much appreciated.

@Anthony Dooley

That's where I am on it, I'll walk away but keep in touch with them to see if they change their minds.

If you truly gave them your best offer, and they didn't bite and are 100% opposed to holding any type of paper, you need to appeal to the emotional side as opposed to the analytical.  This is where the salesmanship aspect comes into this business.  You need to create a value with them by one means or another that transcends monetary value.  If you can spin the transaction and make it less about the dollars and make it about a relationship that you have cultivated, that is your in.  Remember one thing about a sale.  Most people spend 5 minutes locking the deal up, and another 20 minutes talking, ultimately losing the deal.  Build a relationship, but be minimalistic.  Happy hunting!